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Hidden Gem - KPR Mills (Target Price – 1200)

ICICIdirect Research 29 May 2026 DISCLAIMER

KPR Mills is expected to benefit from the uptick in yarn demand. Demend for Indian yarn has increased from countries such as China, Bangladesh and Vietnam due to supply disruptions. India’s yarn exports have witnessed 7% increase over Sept’25-Feb’26. Due to increase in yarn demand from key manufacturing countries, yarn prices have witnessed 35% growth between Oct’25-May’26. Industry cotton yarn spreads have also grown by 75% over the same period as yarn prices have grown faster than the cotton prices during the period.
KPR’s majority of garmenting revenues are from Europe. Its revenue share from Europe stands at 63%. The India-UK FTA is expected to come into effect in H1FY27 while the EU FTA is expected to come into effect from FY28. This can lead to further improvement in demand for apparel from EU region leading to increased order flow. As a result, KPR’s EU share is expected to witness improvement over the next 2 years which stands at ~63% in FY26. Additionally, its share from US stands at ~16% as of FY26. The bilateral trade deal with US is expected to signed over the upcoming months. This will lead improved sourcing from India by US retailers thereby aiding growth of US business for KPR.
KPR’s cash and cash equivalents for FY26 stood at Rs.1368cr. Improving profitability and better working capital management and lower capex will lead to higher cash generation in the coming years. It has a steady dividend payout ratio of 17-20% over the past 3 years. We expect KPR to maintain dividend payout ratio of ~20% over the next 2 years supported by higher cash flows.
 
View: We believe KPR’s yarn and fabric business is expected to perform better in H1FY27 led by improved utilisation levels and better yarn spreads. We expect KPR’s yarn and fabric business revenues to grow at CAGR of 12% over FY26-28E to Rs.2560cr. In garment business, we expect that better order flow from EU coupled with favourable demand from US post signing of trade deal should aid garment business volume and realisation to grow at CAGR of 11% and 2.2% with revenues growing at CAGR of 13.3% over FY26-28E to Rs.4365cr. We expect KPR’s consolidated PAT to grow at a CAGR of 18% over FY26-28E.
 
 

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